Why Costa shares just got smashed like avo

The Costa Group Ltd (ASX: CGC) share price is heading lower.

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The Costa Group Ltd (ASX: CGC) share price is down 23% to $4 this morning after the fruit, berries, tomato, mushroom and avocado grower warned its FY 2019 adjusted net profit would come in between $57 million to $66 million, which is lower than previously forecast and the second profit downgrade Costa has issued this financial year.

In fact Costa shareholders might want to look away now.

Source: Google Finance, May 30

As we can see the shares are now down 45% in just six months, although that doesn't mean Costa is a bad business, it's just that its management team's forecasts were way off the mark.

Evidently profit forecasting for a global fruit and vegetable grower is a difficult task and the market's confidence in the business will now be hard to win back. It also carries net debt of $244.6 million, which may put other investors off.

Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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